Online Auctioneer Courts SOHO Market

Online auctioneer Onsale Inc. has started an Internet banner advertising campaign to bring more small-business owners into its database of registered bidders.

The company has placed banners on 25 sites, including small-business properties like Entrepreneur Magazine's site at www.entrepreneurmag.com and the small-business areas of larger sites like Yahoo and Excite.

"The media buy is a combination of targeted buys on big sites and [buys on targeted] smaller sites," said Martha Greer, vice president of merchandise management at Onsale, Menlo Park, CA.

The reason for the business-to-business push is that two-thirds of the company's revenue comes from small businesses, though they make up only 20 percent of Onsale's database.

"If you cite the 80-20 rule here, that would be pretty accurate," Greer said.

Currently, Onsale has a database of more than 750,000 customers who have registered their credit card information and spend an average of $800 a year bidding on mostly refurbished computer, office and fitness equipment and more. Onsale's average order size is $185.

Onsale's small-business push plays to the Web's strengths, said Varda Lief, an analyst with Forrester Research, Cambridge, MA. Online auctions can offer services particularly attractive to time-pressed small-business owners like the ability to store credit card numbers, maximum bids and shipping instructions on the site to make repeat buying more convenient, Lief said. Another advantage: automatic e-mail notices can tell small-business owners when products they've indicated interest in go up for bid.

"All of those things play to a business's need for efficiency," Lief said, "whereas for a consumer, they're nice to have but not needed."

Onsale sends about 10 special-offer e-mails a week to various segments of its database according to recipients' past buying behavior. The company also sends a daily "Steals and Deals" e-mail newsletter.

"Not every customer gets [e-mail] every day so we don't inundate people," Greer said. "If we're putting up a big batch of 21-inch monitors, we'll pull a list of people who have bought large monitors in the past or who are buying scanners and look like they might be a graphics customer or a desktop publisher and we'll send a targeted e-mail to those users," she said, declining to give response rates.

Meanwhile, Onsale is applying direct marketing fundamentals to its e-mail marketing efforts to increase average order sizes and spur more frequent repeat business.

"We're doing a lot of basic recency, frequency and monetary-value analysis on our database, and we've found those principles apply equally well in the e-commerce environment [as they do offline]," Greer said. "And why shouldn't they?"

Onsale recently tested a reactivation e-mail to half of a list of customers who hadn't purchased in six months. The half that received the e-mail-- a reminder with several current deals-- visited Onsale's Web site in greater numbers and placed higher average orders, Greer said, resulting in 35 percent more revenue than the half of the list who did not get the reactivation e-mail.

"Not only did [the reactivation e-mail] bring back more people, but those who came back spent more money," she said.

Onsale doesn't bombard customers with e-mail, Greer noted.

"E-mail marketing is not free. Even though you're not paying for paper, printing and postage, you're still taking up mind share of your customer," she said. "Direct marketing costs can be considered [in terms of] the rapport you must build up. If you lose that rapport, you've now lost the opportunity to even get their attention."

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